7/12/2004 @ 6:00AM

Attracting VCs To Your Business

Guy Kawasaki is an entrepreneur, author and the chief executive of Garage Technology Ventures, a venture capital investment bank for tech firms. He will provide expert answers to all your questions about starting a business.

My company is involved in computer security. I’d like to get some VCs to invest in it. The problem is, I have a criminal record for hacking. However, I feel that my past contributes to my knowledge of the business. Should I tell VCs about my background?

Yes, you should. They will find out anyway when they do a background search. You might find a VC that will consider your background intriguing and relevant, but it’s going to be a long, tough journey.

What are the hot areas that VCs are currently investing in?

This is largely a useless question, so I will provide a useless answer. By the time you read about “hot areas” in Forbes, it’s too late. Do what you love, understand and are good at. Don’t look for hot areas and then try to tap them.

What’s the one point I need to get across when meeting with VCs?

There isn’t only one point. There are many, many points, including what you do, who you are, who your customer will be and what your magic sauce is.

What are the drawbacks of having a VC invest in my company?

As soon as you take any outside funds, you’ve accepted the responsibility of caring for those funds and returning a profit. It’s not “your company” anymore–no matter what mathematical percentage you own. You are now working for investors. Don’t ever forget that. If you can’t handle this, don’t take outside money.

One of my partners has started dating one of our investors. My other two partners think she should step down to solve this conflict of interest, but I think that may hurt our relationship with the investor more. What should we do?

It depends on the valuation you got. :-) I would bet that this will blow up in your face. For example, what’s going to happen when they break up? Starting a company is hard enough. You just made it harder. Aren’t there enough eligible people in your area?

A VC wants to invest in my company; however, I don’t agree with past investments he’s made. He has invested in stem cell research companies, and I don’t morally believe in stem cell research. Should I still take money from him?

Yes. By the way, I believe in stem cell research, so maybe you shouldn’t take my advice.

About Guy Kawasaki

Guy Kawasaki is the CEO of Garage Technology Ventures, a venture capital investment bank for high technology companies. Previously, he was an Apple Fellow at Apple Computer. He is also the author of seven books. He has a B.A. from Stanford University and an M.B.A. from UCLA, as well as an honorary doctorate from Babson College. He is on the board of BitPass, a micropayments systems company for online content.